March 23, 2011

Netflix Deal Excludes Dexternet

A week after Netflix said it was jumping into the business of original programming, another potential competitor premium cable channel Showtime changed the ground rules for dealing with the fast-growing movie and TV show rental service.

Showtime said Tuesday that its newly negotiated deal with Netflix, which takes effect this summer, no longer includes online streaming rights to its currently airing first-run series, such as "Dexter" and "Californication."

When the new agreement kicks in, episodes of those shows will disappear from Netflix and will be offered exclusively on Showtime's online service.

"A number of Showtime original series will continue to be available and stream on Netflix including 'The Tudors' and 'Sleeper Cell,' among others," Showtime said in a statement, referring to programs that have gone off the air.

This is a significant departure from Showtime's current arrangement with Netflix, which expires this summer. Under that pact, the cable channel provided several seasons of "Dexter" and "Californication" to Netflix in an effort to introduce its signature shows to a wider audience.

When TV networks and studios first made deals with Netflix a few years ago, the Los Gatos company was considered an innocuous movie rental service much like the corner Blockbuster store. But now that Netflix has more than 20 million customers and its Internet streaming is more broadly accessible, the television industry is increasingly viewing Netflix as a deep-pocket rival that could eventually supplant cash-cow premium cable channels.

Showtime's chief rival, Time Warner Inc.'s HBO, has been particularly uncooperative, holding back all of its new television shows and movies. The smaller Starz and Epix premium channels, meanwhile, currently provide their movies and original programs, such as "Spartacus."

Showtime decided to clamp down on the rights to its first-run programs in an effort to use them as bait to sign up and retain subscribers. (Showtime doesn't control the rights to its popular series "Weeds," which is owned by Lionsgate.)

CBS Corp. owned Showtime still sees a role for Netflix as a digital syndication outlet for older product. Last month, CBS similarly announced a $200-million deal with Netflix to distribute such classic CBS-owned shows as "Frasier," "Cheers," "Twin Peaks" and "The Twilight Zone."

If people want to watch recent Showtime programs online, they must pay for the channel. "Current and past seasons of our original series will be available to our authenticated subscribers via our TV Everywhere service Showtime Anytime," the company said in a statement.

Asked to comment on the move, a Netflix spokesman said, "We have a great relationship with CBS licensing content from all of its channels, including Showtime, and we continue to negotiate for more movies and shows."